Technical Analysis of Stocks & Commodities magazine is the savvy trader's guide to profiting in any market. Every month, we provide serious traders with information on how to apply charting, numerical, and computer trading methods to trade stocks, bonds, mutual funds, options, forex and futures. Futures and Option Trader The information in Futures & Options Trader magazine is intended for educational purposes only. It is not meant to recommend, promote, or in any way imply the effectiveness of any trading system, strategy, or approach. Traders are advised to do their own research and testing to determine the validity of a. Futures & Options Trader is a full-feature digital magazine covering trading strategies, analysis, news, and education specifically for futures and. options traders and investors. Forex related information. Make certain you sign up for the free option which will allow you access to the online and pdf versions of the magazine. Current information about technical, mathematical and .
Facebook Google Twitter. Password Hide. Remember me. I agree to the Terms. Lost your password? Please enter your email address, Future option trader magazine. You will receive a link to create a new password. Toggle navigation. Embed Script.
Size px x Future option trader magazine x x This strategy uses an indicator filter to reduce the impact of those losses. Long straddles: The importance of buying time. By Jim Graham Options Watch. Futures Snapshot. Options Radar, Future option trader magazine. Starting in May, futures- and options-related content will appear in Active Trader magazine. Managed Money.
New Products and Services. Options Trade Journal. As a mentor for DiscoverOptions. Lentz is constantly developing new strategies on the use of options as part of a comprehensive profitable trading approach. He regularly speaks at special events, trade shows, and trading group organizations.
Volume Future option trader magazine, Issue 3, Future option trader magazine. Clark St. All rights reserved, Future option trader magazine. Information in this publication may not be stored or reproduced in any form without written permission from the publisher.
It is not meant to recommend, promote, or in any way imply the effectiveness of any trading system, strategy, or approach. Traders are advised to do their own research and testing to determine the validity of a trading idea.
Trading and investing carry a high level of risk. Past performance does not guarantee future results. In the final trade, the system went long on July 14 and exited on Aug. The trade rules for the However, such systems usually trigger many whipsaw system are: trades when the price fails to follow through in the expected direction. Go long tomorrow with a stop at the highest high This system tries to reduce whipsaw losses with the of the past days. If price is at the bottom of the range, the indicais unprofitable.
Go short tomorrow with a stop at the lowest low value is 1; and if price is exactly between these boundaries, of the past days. The HLR system initially enters the 4.
Exit short tomorrow at the market if the HLR market using standard breakout rules, but it exits a losing indicator climbs above 0. Figure 1 shows an example in corn futures C. The upper The system was tested on daily price data from January pane Future option trader magazine the HLR indicator Future option trader magazine its threshold values of to December on a portfolio of 20 futures con0.
The system exited when the HLR indicator dropped below 0. However, had the system stayed in this trade, Future option trader magazine, it would have exited on May 2 and lost an additional 6 points. Another whipsaw trade occurred when the system sold short on May 2 and exited on June 21 after the HLR jumped above 0.
Price continued higher and hit a new day high on July In this case, the system would have lost an Source for all figures: Wealth-Lab Inc. A maximum of three percent of account equity was allocated per trade. The number of contracts is calculated using the basis price the closing price on the day prior to the entrythe stop-loss level, the dollar value of a one-point move in the contract, and the total account equity.
DD: Longest flat period: continued on p. Strategy performance Figure 2 shows the strategy's equity curve increased consistently in the first five years of the test period, but it became more volatile at the end of the test; Figure 3 shows the largest drawdowns deeper than percent appeared at the end of the test period. The system resembles other trend-following systems because it makes most of its profits from a relatively low number Future option trader magazine winning trades The average profit is 1.
To find out if the HLR component had value, a second test was conducted on the same day channel breakout strategy, without the HLR exit strategy. All other parameters and settings remained the same. This standard system had an annualized gain of 7. Further tests compared performance of using various HLR threshold settings and breakout channel look-back periods.
The blue bar in Figure 5 represents the annualized percentage profit of the breakout system without the HLR indicator. The rest of the bars represent performance for the system with the HLR exit strategy, using long-exit thresholds from 0. The HLR indicator provided an advantage over the traditional breakout method for nearly all parameters, with the best overall results occurring with exit thresholds of around 0, Future option trader magazine.
For information on the author see p. You can depend on our specialized broadcasters and news analysts to recognize opportunities and hazards in real-time, 24hrs a day. But knowing how to find options with the best volatility characteristics and tapping into LEAPS can allow you to construct higher-probability long straddles. T he long straddle is a non-directional option strategy that can yield solid results with low risk.
Besides price, the other variables that affect the value of a long straddle are volatility and time. The trick is to determine when options are cheap.
Options are undervalued when IV is low from a historical perspective that is, it is low compared to past IV readingsas well as low relative to historical, or statistical volatility SVwhich is the actual volatility of the stock.
Also, another reason to buy at-the-money options is changes in IV will have a bigger impact on them with a few months left to expiration. Long straddles actually provide two ways to make money: Either the underlying stock can make a big price move, or IV can increase. Putting volatility in your corner Placing a long straddle on a stock with historically low IV can provide a considerable advantage. Every asset has quiet periods when its options are cheap and volatile periods when its options are expensive.
The first thing to look for when searching for likely straddle candidates is the current IV compared to past IV. The best candidates Future option trader magazine long straddles are in the 10th percentile of Future option trader magazine — that is, 90 percent of the time the IV has been higher than it is currently.
Different time periods can be used to calculate this percentile; the past three years of volatility history is a good place to start. One way to measure IV in this way is to average the IV levels of both calls and puts and then plot those averages on a graph, with each data point representing a weekly average. A large price move will make one of the legs deep in the money, providing a gain by virtue of price movement alone. Also, an at-the-money straddle will be cheaper than a straddle whose Future option trader magazine price is not equal to the stock price because it consists of options whose values are composed solely of time value i.
Of course, you will not always find strike prices that are identical to the current stock price, but you want options that are as close as possible.
The volatility chart has two lines. Not only was IV currently at its lowest point Future option trader magazine options began trading on BBH, but it was also considerably lower than SV 15 percentile rankindicating the option prices are not even reflecting the actual volatility of the stock, Future option trader magazine.
For a long straddle to be experience because of a 1-percent IV increase. For that reason, having access to a program that The drawback of time Options are a decaying asset, and as you get closer to expi- allows you to analyze and graphically display the profit or ration, the rate of decay accelerates. The value of a strad- loss of a potential option trade is very important.
In time decay plus the initial purchase cost. It is usually expressed as the value a posi- between the available strike prices of and Comparing the possible trades revealed using the strike Theta is always negative for a long straddle because the price had a higher expected return. A six- mum amount of capital to invest, in each case buying as month straddle does not decay much at first, and time many contracts as possible to keep the amount invested in decay does not really begin Future option trader magazine accelerate until the last the trades as close as possible.
The straddle using the August options has a vega of Figure 2 shows what the two trades would look like 30 days from purchase with a projected IV increase of 5 percent during this Source: OptionVue Systems www.
Despite the drawback term options because you actually have the chance, of time decay, the Future option trader magazine market is in constant motion. However, just to break even Future option trader magazine 30 days — even with future its freedom to move.
In other words, make a long straddle profitable. In contrast, notice the longer-term LEAPS straddle would positions using short-term options, expecting volatility to be profitable across the range of stock prices as long as IV revert quickly to its mean. However, Future option trader magazine, experience suggests increased 5 percent, Future option trader magazine.
Keep in mind the value of a straddle with more days until That shows just how important buying time can be in deterexpiration will not change as much as one with fewer days mining your probability of placing a successful trade. Deciding when to close a long straddle is subjective. If a left when the stock price moves up or down. The best stradmove in the underlying stock has created a gain, one leg dle for taking advantage of changes in IV is not going to be will now be worth much more than the other.
Future option trader magazine dominant the best one to capitalize on quick moves in the stock price, Future option trader magazine. You should then determine if standing how to balance likely price moves against theta volatility has returned to more normal levels, and consider and vega are things you need to consider when trading straddles.
There are no sure things in option trading, but closing the position if it has. The pattern tries to spot market bottoms in Future option trader magazine Dow Jones Industrial Average DJIAso the strategy involves buying call options to take advantage of an expected rebound.
Sep 11, · Futures & Options Trader (formerly just 'Options Trader') is a free full-feature digital magazine covering trading strategies, analysis, news, and education specifically for futures and options traders and investors/5(3). Technical Analysis of Stocks & Commodities magazine is the savvy trader's guide to profiting in any market. Every month, we provide serious traders with information on how to apply charting, numerical, and computer trading methods to trade stocks, bonds, mutual funds, options, forex and futures. SFO - Stocks, Futures and Options Magazine This electronic magazine is a place for active traders to find consistently useful and cutting-edge articles on markets, trading strategies and technical methods, as well as economic and regulatory issues.